The Halal IPO Market: Saudi Aramco's Spinoffs and What's Next

Most of what gets described as "the Aramco spinoff program" never reached a public market at all. Before you plan a halal portfolio around the next wave of Gulf listings, it helps to separate the deals that actually produced tradeable shares from the ones that produced press releases.

What Aramco actually listed

Saudi Aramco's IPO on the Saudi Exchange in December 2019 raised roughly $25.6 billion at pricing and about $29.4 billion once the over-allotment was exercised, the largest IPO on record. The government sold something in the neighborhood of 1.7% of the company. Since then the monetization has taken three different shapes, and only one of them is an IPO.

Luberef, formally Saudi Aramco Base Oil Company, listed on Tadawul in December 2022 under ticker 2223. The detail that matters: it was a pure secondary offering. Jadwa Investment sold its roughly 30% stake, Aramco kept its 70%, and the company issued no new shares. Aramco did not shrink and Luberef did not receive a riyal of fresh capital.

The 2021 pipeline transactions were not listings. Aramco sold 49% of Aramco Oil Pipelines Company to an EIG-led consortium for around $12.4 billion and 49% of Aramco Gas Pipelines Company to a BlackRock-led consortium for around $15.5 billion, both structured as lease-and-leaseback deals with private investors. There is nothing there for a retail investor to buy.

The June 2024 offering, which raised roughly $11.2 billion, was the government selling a further slice of existing Aramco shares. No new entity, no new ticker.

SABIC and Petro Rabigh, which sometimes get counted in the spinoff tally, were already listed long before. Aramco bought PIF's 70% SABIC stake in a deal announced in 2019 and closed in 2020 for about $69.1 billion, which moved SABIC into Aramco's consolidated accounts rather than out of them.

So the honest count of genuine Aramco subsidiary IPOs is one. Treat any forecast of a steady annual stream of Aramco carve-outs as a hypothesis rather than a schedule.

Why Aramco itself clears the screens so easily

Aramco is one of the cleanest large-cap passes in global equities, and the reason is arithmetic rather than sentiment. Its interest-bearing debt has historically sat in the low single digits as a share of its market capitalization, against a market cap in the trillion-dollar range. Every mainstream threshold is met with enormous headroom:

• AAOIFI Shariah Standard No. 21 style screening: interest-bearing debt below 30% of market cap, interest-bearing deposits and investments below 30%, prohibited income below 5%.
• Dow Jones Islamic Market and S&P Shariah: debt below 33% of a trailing 24-month or 36-month average market cap.
• FTSE Shariah and MSCI Islamic: debt below 33.33% of total assets.

Aramco's interest income on its cash balances is trivially small next to hundreds of billions in revenue, so the 5% purification threshold is never in question either. That is why it sits in the Islamic index families run by S&P, Dow Jones, FTSE and MSCI. You can run the same ratios on any Gulf listing yourself using the stock screener.

Saudi listings are not halal by default

A common shortcut says the Saudi regulatory environment effectively requires Shariah compliance. It does not. The Capital Market Authority regulates listings and the Saudi Exchange has published a Shariah screening framework and a compliant-securities list since 2017, but compliance is a label applied after the fact, not an admission requirement.

Tadawul's heaviest sector weight is banks, and the conventional ones fail on income composition. Saudi National Bank, Riyad Bank and Banque Saudi Fransi are conventional institutions. Al Rajhi, Alinma and Bank Albilad operate on Islamic contracts and pass. If you buy a broad Saudi ETF assuming the index is pre-screened, you are very likely holding conventional bank exposure. Compare how different providers handle this in the methodology notes.

Screening an IPO is harder than screening a seasoned stock

This is where the practical work lives, and it is the part most coverage skips.

The denominator problem

A company with no trading history has no trailing 24-month or 36-month average market cap, so the DJIM and S&P denominators do not exist yet. Providers fall back to total assets or the offer-implied capitalization until a price history accumulates. The consequence is real: a company can pass a total-assets screen on listing day and fail a market-cap screen six months later after the stock re-rates downward, or the reverse. If two funds you own disagree about a new listing, this is usually why. You can put two candidates side by side on the comparison tool.

Read the use of proceeds

If the offering is primary and the prospectus says proceeds retire interest-bearing debt, your post-money ratios are better than the audited figures in the document. If the offering is entirely secondary, as Luberef's was, nothing on the balance sheet moves and the prospectus ratios are your day-one ratios. Many Gulf and Southeast Asian IPOs are majority secondary, which means the sponsor is cashing out rather than funding growth.

Asset-light listings and the sarf problem

AAOIFI Shariah Standard No. 21 governs the trading of shares. When a company's assets at listing are overwhelmingly cash and receivables, the classical objection is that buying its shares becomes an exchange of money and debt for money, which pulls in the rules of sarf and the restrictions on trading debt at a discount, rather than ordinary equity trading. A refinery or a plantation clears this without discussion. A newly capitalized holding company sitting on an untouched IPO cash pile is exactly the case scholars argue about. Most contemporary Shariah boards require a meaningful tangible-asset component before permitting trading away from par.

Stabilization mechanics

Worth asking your broker how the over-allotment is structured. A stabilizing manager who borrows shares, sells them, and buys them back is running a short position, and conventional short selling is rejected under AAOIFI-aligned views because you are selling what you do not own. An over-allotment written as a genuine option to purchase additional shares from a selling shareholder avoids the borrow entirely. This is a reasoned judgment rather than a settled ruling, and deal documents vary.

Subscribing in order to flip

Applying for an allocation with the intention of selling within days is speculation on allocation scarcity rather than on the business. It does not become permissible because the underlying company passed a ratio test.

The rest of the pipeline, market by market

Malaysia

The Securities Commission's Shariah Advisory Council publishes its list of Shariah-compliant securities twice a year, in May and November, and it covers roughly four-fifths of Bursa Malaysia listings. The test is two-tier: business activity benchmarks of 5% and 20% of revenue or profit before tax depending on the activity, plus cash over total assets and debt over total assets each below 33%. Because the base rate of compliance is so high, a Malaysian IPO is more likely than not compliant at listing.

Indonesia

OJK publishes the Daftar Efek Syariah, also twice yearly, and its thresholds are noticeably looser: interest-bearing debt below 45% of total assets and non-halal income below 10% of total revenue. A company that sits comfortably on the DES can fail an AAOIFI or DJIM screen. The wave of Indonesian Islamic banking separations is driven by regulation, specifically the OJK framework requiring sharia business units above a defined asset size or share of parent assets to be spun off, which followed the 2023 financial sector law. Bank Syariah Indonesia was itself formed in 2021 by merging three state-owned Islamic units.

Pakistan

The Federal Shariat Court's April 2022 judgment ordered the elimination of riba from the financial system, and a constitutional amendment in 2024 fixed the target at the end of 2027. That deadline, not general enthusiasm, is what will push conversions and listings on the Pakistan Stock Exchange. Faysal Bank's completed conversion to a full Islamic bank in 2023 is the working template. Currency and balance-of-payments risk is genuine and gets priced into every deal.

Turkey

Participation banks are the relevant category. Albaraka Türk trades on Borsa Istanbul, while Ziraat Katılım, Vakıf Katılım and Emlak Katılım remain state-owned. Borsa Istanbul maintains dedicated Katılım indices. Lira depreciation has repeatedly overwhelmed positive local-currency returns, so the compliance question and the return question point in different directions here.

How the other frameworks read the same deals

An Aramco or Luberef listing passes Islamic screens and passes a Biblically Responsible Investing screen too, since the six BRI categories cover abortion, alcohol, gambling, pornography, tobacco and anti-family entertainment, none of which touch a refiner. A Catholic investor applying the USCCB guidelines runs into the environmental stewardship provisions rooted in Laudato Si', which sit uneasily with a pure hydrocarbon producer even though nothing in the exclusion list names oil outright.

A defense listing splits the frameworks sharply. Saudi Arabian Military Industries, if it ever comes to market, would likely clear a bare AAOIFI ratio test while failing the Dow Jones Islamic and FTSE Shariah business-activity screens, both of which exclude weapons and defense. It would probably clear BRI, which does not screen armaments. It would fail the USCCB weapons provisions, which are among the most explicit exclusions in that framework.

An Islamic bank IPO inverts the pattern. It passes Shariah screening by construction and creates the hardest question for a halakhic investor, because murabaha sets a credit price above the cash price for the same goods, and that time-based increase is treated as avak ribbis under the rabbinic tier of the two-tier framework taught by institutions such as Bais HaVaad. Heter iska is a document a lender executes to restructure a loan as a joint venture, so it does nothing for shares you bought on an exchange. Poskim differ on whether a passive public shareholder counts as a lender at all, which is where the analysis actually turns.

For an LDS investor, Elder Dallin H. Oaks warned against financial speculation in 1971, and the flipping behavior that surrounds oversubscribed IPO allocations is close to the center of that warning. Holding a compliant operating business bought at a sensible price raises no such issue. You can track sector and geographic exposure across any of these lenses on the markets page.

The Bottom Line

The Aramco spinoff story is one real subsidiary IPO (Luberef, December 2022, entirely secondary), two private pipeline lease-backs, and a government share sale, so build expectations from that record rather than from the pipeline chatter. Aramco itself clears every mainstream Shariah threshold with room to spare, but a Saudi listing is never compliant simply because it is Saudi, and the genuinely hard part of screening a new issue is that the ratio denominators, the use of proceeds and the tangible-asset mix all behave differently on day one than they will a year later. Read the prospectus before you read the index label.

This is educational research rather than a religious ruling or personalized investment advice, and you should confirm any specific holding with a qualified scholar or advisor.